Chris Bradford

Letting the market work.

Attorney, lead blogger of Austin Contrarian., May 12, 11.

Tagged with transportation, cities, development, housing

Randal O’Toole often says the “right” thing about inner-city development. He says he would abolish parking minimums of any sort and relax inner-city anti-density zoning; I would do the same. And asserting that most American families with children prefer single-family homes to small apartments does not make one an anti-city bigot.

But there is a difference between being a market advocate and being a dogmatic shill for suburbanism. O’Toole constantly arms those who claim he’s the latter. Exhibit number 731: this piece ridiculing the plan by a homebuilder—D.R. Horton, a national, production homebuilder—to build “micro-homes” in Portland. These “micro” homes are single-family homes that range from 364 to 687 square feet. According to O’Toole, the demand for these tiny houses is a pernicious consequence of Portland’s growth boundary.

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I’m not sure why he thinks micro houses are absurd. I imagine these houses are about the same size as the typical apartment but have more privacy and less noise. They might attract people who’d otherwise be put off by dense city living.

Perhaps a bigger point is that this type of development is exactly what the plain vanilla model of urban land prices predicts, even in an unfettered land market. Land prices near the city core are high, at least if it’s a desirable place, because the cost of getting there is low. Land prices in the suburbs are low, because the cost of getting to the core is high. High land prices cause central property owners to make do with less land and, inevitably, smaller homes. Low land prices cause suburban property owners to take more land and build bigger dwellings on them.

Sometimes demand for living near the city center rises. Transportation costs might rise, making proximity to the center a relatively better deal. Or the city might improve the amenities or reduce the crime in the city center, making it relatively more attractive. Or property owners’ preferences might shift to a more urban habitat. Or—and this is O’Toole’s implicit claim—the city might choose to raise the cost of suburban development, either by limiting the supply of land or adopting other anti-growth policies. Any of these will cause denser infill development with smaller homes and less suburban development.

Which of these explains Portland’s rising central-city prices is an empirical question. I don’t presume to know the answer. Pointing to suburban growth boundaries is not an absurd hypothesis, but it’s not obviously true, either—central city prices have been rising in lots of places without suburban growth boundaries (including Austin). O’Toole’s bald assertion that growth boundaries are to blame isn’t compelling evidence.

But O’Toole isn’t just making bald empirical claims. He’s dismissing a hard-nosed, for-profit homebuilder’s proposal to supply exactly the kind of housing that the economic model predicts. And he is ridiculing as “crazy” buyers who also would behave as the models predict. This not the market position; it’s just the opposite. And it is the just the kind of shilling which draws so much criticism, including from market sympathizers like me.

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Source: Austin Contrarian, May 11, 2011

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